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What Is Driving Lackluster 3rd-Quarter Performance at Hibbett Sports?

- By Mayank Marwah

The sporting shoes retailer Hibbett Sports Inc. (HIBB) came out with its fiscal third quarter earnings on Monday before market opened. The company's revenue and earnings missed estimates and were also down from the same quarter last year.

The numbers of the quarter

The company's net income for the quarter was $1.5 million or 8 cents per share, down from 7.6% million or 37 cents per share reported in the year-ago quarter. Barring acquisition costs, the company's earnings stood at 14 cents per share. In fact, the athletic-inspired fashion retailer posted revenues of $216.9 million, down 8.8% year-over-year.


Same-store sales for the quarter ended Nov. 3, 2018, spiked 0.1%. E-commerce sales jumped a mammoth 62.2% and made up 8.8% of the total net sales of the quarter. SG&A expenses climbed to 28.7% of sales, compared to 24.4% of sales in the year-ago quarter due to rise in the company's operational costs as a result of its e-commerce business. Jeff Rosenthal, president and CEO of Hibbett, commented:

"We continue to see good momentum in our branded apparel business, which helped offset softness in our licensed, equipment, and accessories business in the quarter ... Our e-commerce business continues to exceed expectations, and we expect continued traction as we benefit from enhancements to our mobile app and our new Buy Online, Pick up in Store and Reserve Online capabilities."

Bird's-eye view

Higher SG&A expenses in the form of marketing and omni-channel investments as well as higher employee benefit costs have taken a toll on the company's earnings in the past, besides the current quarter. The company's license, equipment and accessory segments have also been underperforming of late.

Looking forward, the company sees footwear and digital sectors turnings its sales around. Though footwear comps in the third quarter plummeted, the sector's fourth quarter looks promising: The company continues to add fine products in the footwear segment. On the other hand, e-commerce sales continue to impress and are expected to grow even further. As such, the company rolled out its own mobile app earlier this year that permits customers to shop online and have access to their Hibbett Rewards account. The mobile app is expected to contribute a substantial portion of the company's digital sales.

Outlook

As far as the full year is concerned, the Alabama-based sporting goods retailer projects that its diluted earnings per share will lie between $1.55 and $1.65. The company also raised its full-year comps guidance from flat to up 1%, which was more than its previous forecast of -1.0% to 1.0%. On the other hand, SG&A expenses are estimated to rise by 8.8% for the year.

Disclosure: I do not hold any position in the stock mentioned.

This article first appeared on GuruFocus.